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April 25, 2019 Lorand Laskai Visiting Researcher, Center for Security and Emerging Technology

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April 25, 2019 Lorand Laskai Visiting Researcher, Center for Security and Emerging Technology (CSET) Testimony before the U.S.-China Economic and Security Review Commission Hearing on China in Space: A Strategic Competition? Building China’s SpaceX: Military-Civil Fusion and the Future of China’s Space Industry Introduction Days after SpaceX successfully launched the Falcon Heavy last year, several experts from the China Aerospace Academy of Systems Science and Engineering (CAASSE) wrote, “the lack of utilization of social resources has become an important issue that restricts the better and faster development of China’s space industry.”1 The Global Times put the implications of SpaceX’s achievement for China in more blunt terms: “Our country finds itself in a surprising position where it must desperately catch up with a private company.”2 China has responded to the rise of the U.S. commercial space industry by building its own commercial space industry through military-civil fusion 军民融合.3 Military-civil fusion or junminronghe is the catch-all term for China’s two-decade-long push to enlist private enterprises to upgrade China’s defense industrial base through developing scale and efficiency in dual-use sectors like information technology, robotics, and aerospace. Under the tenure of General Secretary Xi Jinping, China has doubled down on military-civil fusion as a means to modernize the People’s Liberation Army (PLA), particularly in emerging sectors like space. In June 2017, General Secretary Xi called for “a great effort to turn the space domain into the foremost sector in the development of military-civil fusion.”4 The commercial space industry has been a notable priority and early success of Xi’s military-civil fusion drive. Over the past four years, a crop of private launch providers and small satellite makers 1 Xue Huifeng, Zhu Bin, Kangxi Tong, Li Chengfang, Zhang Kui, and Zhang Hao, “ How to View the Falcon Heavy Launch from the Perspective of U.S.-China Space Development,” Military-Civil Fusion in ICT Magazine, February 13, 2018, https://mp.weixin.qq.com/s/fKIA7xMQQr1bkNMYvaMWmQ. 2 “Americans complete a major feat in the early morning, showing us how large the gap is between the U.S. and China [美国人凌晨完成一项壮举，告诉我们中美差距还有多么巨大], Global Times, February 7, 2018, http://world.huanqiu.com/article/2018-02/11589880.html. 3 The correct translation of junminronghe is somewhat contested. ”China’s State Council uses ‘civil-military integration’ as the official translation. However, Greg Levesque and Mark Stokes convincingly argue that ‘military- civil fusion’ underscores the ways in which junminronghe is qualitatively different from traditional attempts to promote civil-military integration in other countries. For the purpose of this testimony, I use ‘military-civil fusion’ to denote the ways in which junminronghe not only aims to build connections between the military and civilian economy, but ‘fuse’ them together. For more, see Greg Levesque and Mark Stokes, “Blurred Lines: Military-Civil Fusion and the ‘Going Out’ of China’s Defense Industry,” Pointe Bello, December 2016, https://static1.squarespace.com/static/569925bfe0327c837e2e9a94/t/593dad0320099e64e1ca92a5/1497214574912/0 62017_Pointe+Bello_Military+Civil+Fusion+Report.pdf. 4 “Strive to establish new era in deep development of military-civil fusion in Shanxi” [努力开创新时代山西军民融 合深度发展新局面], Provincial Defense S&T Industry Office, September 28, 2018, http://sxgfgb.gov.cn/gongzuodongtai/4508.html. have heeded the government’s call and entered the previously closed-off sector. The push dovetails with technological advances in miniaturized satellites like cubesat, which are less capital intensive to produce and launch than traditional satellite technology, and therefore, provide a viable commercial model for small startups. This has allowed military-civil fusion to move ahead in the space sector, even as it struggles to gain traction in other sectors. Military-civil fusion has two central mechanisms: On one side, there is the converting defense technology and resources to civilians (spin-off) component junzhuanmin 军转民, which calls for the military and defense industrial base to spin-off defense technology with commercial potential. On the other side, there is the “opening up” (or spin-on) component mincanjun 民参军, which denotes efforts to increase commercial enterprise participation in defense development and production. In the case of China’s nascent commercial space sector, both mechanisms are at work. The military and state-owned defense industrial base are actively supporting China’s fledgling space startups through transferring technology and technical know-how. At the same time, China’s Central Military Commission (CMC) and The State Administration for Science, Technology and Industry for National Defense (SASTIND) are beginning opportunities for private enterprises to participate in defense research and procurement. Military-Civil Fusion Becomes a Priority Close watchers of Chinese industrial policies noticed a subtle but meaningful development in China’s commitment to military-civil fusion starting in 2016. In March 2016, the Central Politburo raised military-civil fusion to the status of “national strategy.”5 Less than a year prior, China’s State Council unveiled Made in China 2025, which targeted many of the same dual-use industries relevant to military-civil fusion, including space. In January 2017, Xi Jinping established the Central Commission for Integrated Military and Civilian Development, a high-level body to oversee the implementation of military-civil fusion. Several months later, in March 2017, the Equipment Development Department of the CMC released nearly 3,000 patents related to defense technology to the public, marking the first time the PLA has declassified defense patents.6 Taken together, these developments have amounted to a significant shift in how China’s state-owned defense sector and People’s Liberation Army (PLA) interact with the private economy. Nowhere has that shift been more pronounced than in China’s fledgling private space industry. In 2014, the State Council announced that it would allow private capital and enterprises to enter the previously closed- 5 Lorand Laskai, “Civil-Military Fusion: The Missing Link Between China’s Technology and Military Rise,” Net Politics, January 29, 2018, https://www.cfr.org/blog/civil-military-fusion-missing-link-between-chinas- technological-and-military-rise. 6 Meia Nouwens and Helena Legarda, “China’s Declassification of Defence Patents: Novel, but not (yet) a game changer,” IISS, January 2018, https://www.iiss.org/-/media/images/comment/military-balance- blog/2018/february/chinas-declassification-of-defence- patents.ashx?la=en&hash=6191B53451810369DC90075E31961C3F5099CC4D. off sector.7 A series of guiding opinions and action plans released throughout 2017 referenced the space industry as a key sector in the military-civil fusion drive. The 13th Five Year Plan Sci & Tech Military-Civil Fusion Development Special Plan, for instance, specifically named manned spaceflight as a military-civil fusion “mega project,” suggesting that private entities would likely have a role in developing China’s Tianhe-1.8 In a strong signal to the private sector, the PLA Rocket Force recruited 13 private sector consultants to work on key projects in October 2018, marking the first time that the PLA has allowed civilians to participate in sensitive defense projects.9 Policies like these are starting to have an impact. For decades, two state-owned defense conglomerates, China Aerospace Science & Industry Corporation (CASIC) 中国航天科工集团 and China Aerospace Science and Technology Corporation (CASC) 中国航天科技集团, have had a near monopoly on launch and space technology. Within the course of several years, regulatory changes have given rise to a crop of private-funded startups like OneSpace 零壹空间 and LandSpace 蓝箭空间 科技 that are attempting to develop affordable launch technologies. Around these launch companies, an ecosystem of startups specializing in niche segments like nanosatellites and microsatellites, satellite-based geopositioning and internet services, and specialized components is starting to take shape. A mature commercial space industry would accord several significant benefits to China’s national space program and the PLA. On the spin-off side, the commercial sector can develop a scale and efficiency that the defense sector is unable to achieve. In the same way that U.S. companies like SpaceX and Blue Origin are poised to drastically lower the launch cost, the hope is that Chinese companies can reduce cost of launching payloads, first with small satellites and then eventually with larger payloads. Some in the commercial space sector believe that as the commercial space industry gradually matures, the military will withdraw from its direct involvement in rocket development and production and instead act as a customer in a competitive market place.10 This would free up resources within the PLA and state-owned defense industrial base to focus on more ambitious projects like the Long March 9. On the spin-on side, the blurring between commercial and military ventures in the space industry will make it easier for Chinese entities for evade U.S. export controls and capture important technologies. Over time, a robust commercial space sector built through military- civil fusion will help the PLA absorb and integrate space-related technologies from abroad that it currently lacks. In December 2018, the Wall Street Journal reported that a
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